Have you ever wondered what circumstances lead to your car being declared a write-off? The answer may surprise you with its complexity.
Being involved in a car accident is already distressing, but imagine if the damage to your vehicle is so severe that your insurance company deems it too costly to repair. In such cases, your beloved car becomes a write-off, ushering in a whole new world of stress and uncertainty.
It is crucial for every car owner to grasp the circumstances under which their vehicle might be declared a write-off. Equally important is understanding how insurance companies make the final decision to either salvage your cherished ride or bid it farewell in the great scrapyard in the sky.
To put it in simpler terms, the phrase “write-off” is a misnomer and perhaps a more accurate term would be “uneconomical to repair”.
Essentially a car is declared a write-off when the cost of repairing it surpasses its insured value. For example if something struck the undercarriage of your car and damaged the engine’s sump this would likely lead to the leakage of engine lubricant, necessitating a quote for the replacement of visibly damaged items. The quote would also encompass the engine removal process. The engine’s components must be examined to determine if they have been sufficiently lubricated to avoid damage to the crankshaft and bearings due to dry running. If damage is indeed detected, the cost of repairing or replacing the engine must be factored into the equation.
Once the costs have been determined, the insurer will then assess the vehicle’s trade and resale value, factoring in an potential extras the vehicle has that could elevate its overall value. Once the pre-loss value has been determined, the salvage value can then be calculated and this generally ranges between 20% to 30% based on the salvageable components that can be sold. This determines the salvage value.
Subtracting the salvage value from the pre-loss value yields the remaining amount, which is then compared to the total repair costs. This calculation determines whether the vehicle is economically viable to repair or not.
Another significant consideration is whether the accident has distorted the vehicle’s structure. When this happens, restoring the vehicle to its original state becomes highly unlikely.
It’s worth noting that a car can be written off due to reasons other than road accidents. Fire and theft which requires extensive repairs (i.e. the car was stripped) are fairly common instances in South Africa which could necessitate a vehicle being written off.
In the unfortunate event that your car is written off, your insurer assumes ownership of the vehicle. The insurance company will then become the rightful owner and will compensate the insured for the value of the ‘undamaged car’ and, in return, the insured must surrender the license and registration documents to the insurer, who will then handle the car’s disposal through a scrapyard or similar means.
We hope the above sheds some light on the process behind a vehicle write off. If you’re looking for comprehensive insurance quotes for your vehicle, Fachs Financial Services has a team of skilled brokers to help you find the right coverage for your unique needs.
*Please note the following blog post is for information purposes only and does not constitute financial or legal advice.